Treasuries Close Modestly Higher Following Choppy Trading Day

(RTTNews) - Treasuries showed a lack of direction throughout much of the trading day on Thursday before ending the session modestly higher.

Bond prices finished the day on the upside after bouncing back and forth across the unchanged line. As a result the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.6 basis points to 1.985 percent.

The higher close by treasuries came after the Treasury Department's auction of $29 billion worth of seven-year notes attracted above average demand.

The seven-year note auction drew a high yield of 1.759 percent and a bid-to-cover ratio of 2.63, while the ten previous seven-year note auctions had an average bid-to-cover ratio of 2.45.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Treasuries may also have benefited from some disappointing U.S. economic data, including a report from the Commerce Department showing a sharp drop in durable goods orders in the month of December.

The report said durable goods orders plunged by 5.1 percent in December after falling by a revised 0.5 percent in November. Economists had expected orders to dip by just 0.6 percent.

Excluding a 12.4 percent decrease in orders for transportation equipment, durable goods orders still tumbled by 1.2 percent in December compared to a 0.5 percent drop in November.

Jay Morelock, an economist at FTN Financial, said, "Since orders lead shipments, the next few months do not look like they will be getting much better."

"Most have shied from talking about a U.S. recession despite market volatility, but this is among the worst of a stretch of bad numbers in the last four weeks," he added.

A separate report from the National Association of Realtors also showed a much smaller than expected increase in pending home sales in the month of December.

Nonetheless, treasuries turned in a relatively lackluster performance on the day amid considerable volatility on Wall Street.

Trading on Friday may be impacted by a slew of U.S. economic data, including reports on fourth quarter GDP, international trade, consumer sentiment, and Chicago-area business activity.